On October 23, 2026, the Securities and Exchange Commission’s (SEC’s) Division of Examinations (the Division) announced its examination priorities for fiscal year 2027 (the Examination Priorities). The Examination Priorities have a similar structure and share core themes with the fiscal year 2026 examination priorities, but include additional emphasis on certain practices and emerging risks.
This Client Alert focuses on the key priorities most relevant to investment advisers (advisers), registered investment companies, broker-dealers, and certain other market participants.
The Division highlighted the following areas of focus for 2027:
The Examination Priorities are compiled in an annual report that identifies key areas of focus for the Division as it carries out its mission. The Examination Priorities were developed in coordination with divisions and offices across the SEC and reflect examination observations, market developments, investor concerns, industry engagement, and emerging trends affecting the US capital markets.
The Examination Priorities highlight areas that the Division believes present heightened risks to investors or market integrity and thereby will help the Division guide its risk-based examination program during the next fiscal year. The Division notes that the priorities include perennial areas of focus in addition to emerging issues that it will address in examinations, and that the Division may shift its priorities in response to new or developing risks, products and services, market events, or investor concerns.
The Examination Priorities focus on the following areas for advisers:
The Division will continue to focus on whether advisers have adhered to their fiduciary duties, particularly with respect to practices that affect retail and older investors. Priorities include the following:
The Division will assess whether compliance programs address key areas of an adviser’s business and operations, including marketing, valuation, trading, portfolio management, disclosure and filings, and custody, as well as whether an adviser’s policies and procedures are reasonably designed to address the conflicts of interest arising from its particular operations, with special attention to disclosure of fee-related conflicts (see our Client Alert on the SEC’s recent Risk Alert regarding economic conflicts of interest). Division examinations also will analyze the components of an adviser’s annual compliance review, which was the subject of a recent SEC Risk Alert (see our related Client Alert).
The Division also will focus on examining advisers that have undergone certain changes, including those that have changed their business models to serve new types of clients, advise different types of clients, provide advice regarding new asset classes, or provide new services, as well as advisers that have grown through mergers, acquisitions, or other means and/or operate from geographically dispersed branch offices. Specifically, the Division will assess whether these advisers have timely updated their compliance programs to address the changes to their businesses and any resulting risks and conflicts of interest.
Consistent with prior examination priorities, the Division will continue to focus on advisers that have never been examined or have registered recently, including by evaluating these advisers’ ability to identify, address, and disclose risks and conflicts of interest.
Given their significance to retail and retirement investors, the Division will continue to prioritize examinations of registered investment companies (RICs), focusing on (i) compliance programs, disclosures, governance practices, and public filings, (ii) fund fees and expenses, and (iii) portfolio management practices.
The Division also will continue to monitor RICs that hold complex, less liquid, or illiquid investments (including private credit), that employ novel or complex strategies, including funds with leverage vulnerabilities (such as BDCs and inverse and leveraged ETFs), or that rely on exemptive orders to operate (including their compliance with such orders), with particular attention to valuation, redemptions, and disclosure of conflicts of interest and risks. As with advisers, the Division will continue to prioritize RICs that have never been examined.
The Division’s broker-dealer priorities build on long-standing focus areas: financial responsibility, trading-related practices and services, retail sales practices (including compliance with Reg BI), AML, and supervision. Compared with fiscal year 2026, the changes are largely refinements rather than a change in direction, although several items have been added, reframed, or dropped. New or sharper areas of emphasis include recent amendments to the Customer Protection Rule, extended trading hours, and foreign omnibus accounts. Broker-dealers’ use of SI is discussed below.
Examinations will continue to focus on compliance with the Net Capital Rule, the Customer Protection Rule, and related internal processes, procedures, and controls. Notably, the Division will review compliance with recent amendments to the Customer Protection Rule relating to daily customer reserve computations and US Treasury clearing.Recent amendments to Rule 15c3-3 require carrying broker-dealers with average total credits of $500 million or more to perform customer and PAB reserve computations and related deposits daily rather than weekly, while separate Treasury clearing amendments modify the reserve formula to address customer assets posted as margin in connection with centrally cleared US Treasury transactions. Examiners will also assess credit, market, and liquidity risk management controls, including whether firms have sufficient liquidity to manage stress events and remain in compliance with the Net Capital and Customer Protection Rules. Prime brokerage activities will be reviewed with attention to concentration, liquidity, and counterparty credit risks.
Equity and fixed income trading practices remain a priority. As more trading venues offer extended trading hours, the Division will review the related operational challenges, as well as whether liquidity providers are available and willing, ready, and able to provide liquidity on and off exchange, and the related market and credit risk management policies and procedures. The Division will also review order routing and execution, including compliance with best execution obligations; the pricing and valuation of illiquid instruments such as private credit and private equity; and compliance with order-priority requirements in municipal securities activities.
Reg BI remains central to broker-dealer examinations, with the Division continuing to focus on product, account type, rollover recommendations, conflict mitigation, reasonably available alternatives, and the Care Obligation, and adding the Disclosure Obligation as a fifth area of focus. Examiners will concentrate on complex, higher-risk, or illiquid products (newly including low-priced or small-cap securities, zero-days-to-expiration options, and single-stock or focused-market ETFs), recommendations to older and vulnerable investors, dual registrants’ conflicts and account selection practices, and Form CRS disclosures.
In a new item expressly tied to the Division’s role in informing SEC policy, examiners will review how broker-dealers supervise (i) compensation or other payments to unregistered persons who may be acting as finders for the firm, and (ii) transaction-based compensation paid to personal-service entities that are not registered as broker-dealers.
AML, which the fiscal year 2026 priorities addressed as a risk area across market participants, now has its own place in the broker-dealer section. The Division will continue to review whether broker-dealers:
The references to significant business growth, foreign-company trading risks, and ongoing customer due diligence are new relative to fiscal year 2026. Reviews of foreign-company trading risks will be coordinated with the SEC Cross-Border Task Force’s efforts against international market manipulation and fraud. Foreign omnibus accounts will receive particular attention, especially where the broker-dealer cannot identify a foreign financial institution’s underlying customers or ultimate beneficial owners because of the omnibus structure (e.g., through “nested” relationships).
Examiners may review “special due diligence” programs for foreign correspondent accounts, including foreign omnibus accounts, as well as compliance with customer identification program, customer due diligence, and SAR filing obligations. Finally, the Division will review whether broker-dealers monitor and comply with Office of Foreign Assets Control (OFAC) sanctions.
Supervision now appears as a stand-alone broker-dealer priority. The Division will evaluate whether broker-dealers maintain supervisory systems, written policies and procedures, and internal controls reasonably designed to achieve compliance with the securities laws, including for new business activities and investment products, and whether appropriate, qualified individuals have been given the authority to carry out supervisory responsibilities.
The Examination Priorities also identify the following areas of focus, which affect various market participants.
To help ensure the safeguarding of customer information, examinations will continue to focus on firms’ governance practices and their policies and procedures relating to data loss prevention, access controls, account management, and response and recovery protocols for cyber-related incidents, including ransomware attacks. Examiners will also assess risks associated with firms’ increased use of third-party service providers and shared technologies, including the effectiveness of related risk management.
As registrants and threat actors alike increasingly rely on SI, the Division will focus on how registrants assess and prepare for SI-related cyber threats, such as SI-generated phishing and deepfake voice and video used for social engineering. The Division will also prioritize policies and procedures for monitoring SI, including its use in fraud prevention and detection, back-office operations, AML and Reg BI compliance, and trading functions.
For registrants that provide automated investment advice or use trading algorithms, the Division will assess whether (i) representations are fair and accurate, (ii) operations and controls are consistent with disclosures, and (iii) algorithms produce advice or recommendations consistent with investors’ investment profiles or stated strategies.
Given that the Regulation S-P compliance deadlines have passed, examiners will evaluate whether firms have designed, implemented, and maintained policies and procedures addressing the customer information safeguards required by Regulation S-P and will review incident response programs, customer notification procedures, and oversight of service providers.
Examiners also will review policies and procedures adopted under Regulation S-ID, focusing on firms’ identification and detection of, and response to, red flags of identity theft, particularly in account takeovers and fraudulent transfers, and whether firms are updating their programs to address emerging risks such as SI and stolen credentials.
Examiners will focus on emerging trends such as SI, tokenization of securities, extended trading hours, and quantum computing, as well as SCI entities’ reliance on cloud and other third-party vendors, including how they manage vendor risks and identify vendor systems that qualify as SCI systems or indirect SCI systems.
The Examination Priorities signal where the Division may focus its efforts with respect to SEC-regulated entities. However, the list is not exhaustive, and registrants should expect examinations to extend beyond the identified areas to their broader compliance with applicable securities laws and rules. Earlier this month, the Division published The SEC Exam Handbook: A Practical Guide on Process and Engagement, which offers a roadmap of the examination process, avenues for feedback, and practical tips and resources.
Advisers should consider the Examination Priorities when assessing the effectiveness of their compliance policies and procedures and preparing for examinations, including in connection with their annual compliance reviews. In particular, advisers should consider:
Broker-dealers should similarly consider the Examination Priorities when assessing their compliance programs and preparing for examinations. In particular, broker-dealers should consider:
Broker-dealers should also consider whether their AML programs adequately address risks from foreign omnibus accounts, foreign-company trading, and significant business growth, and whether supervisory systems and controls have kept pace with new business activities and products.
The authors would like to thank Seth Bilbrey for his contribution to this Client Alert.